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Check-cashing outlets, pawnshops, storefront tax preparers, and sub-prime lenders saturate the financial landscape in disadvantaged communities. A pro bono study conducted for TAP by McKinsey & Co. assessed the need for TAP’s services for residents of these areas:
- There is a growing trend towards “unbanking;”
- Low-income families are falling prey to bank alternatives;
- EITC earners in the City of Chicago represent a disproportionately higher percentage of taxpayers utilizing tax refund loans (which can consume up to a quarter of the clients’ total refund); and
- Funds allocated to EITC earners are ending up in the pockets of commercial tax preparers.
Because low-income families lack the most basic access to mainstream services, they often rely on costly fringe financial services that consume large portions of their incomes and make it difficult for them to save even small amounts for the future.
| The Results |
The Possibilities |
| 10,041 Tax returns filed |
Free and acccurate tax preparation.
Estimated benefit, a savings of $100. |
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The Earned Income Tax Credit.
Estimated benefit, $1,400 average refund. |
An unexpected $5500 tax return.
Estimated benefit, roof repairs and a new washer and dryer |
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| 1,182 FAFSAs completed |
Tuition to a four-year university.
Estimated benefit, $10,000 per year. |
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English language classes to work the day shift.
Estimated benefit, 20% higher pay. |
An Associates Degree in Nursing.
Estimated benefit, competitive salary plus benefits. |
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| 590 Bank accounts opened |
Direct Deposit, no Refund Anticipation Loan.
Estimated savings, 30% of the refund. |
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The bank cashes paychecks for free.
Estimated savings, $40 per month. |
First savings account.
Estimated savings, $1,000 per year. |
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